Naperville Business Lawyer on Smart Financial Moves for Small Business Owners
For small business owners, making intelligent financial decisions is essential for success. Studies show that an astounding eight out of ten new small business owners fail within the first year and a half of starting their business. Many of these businesses go bankrupt because the owner made major mistakes with how he or she managed finances. Whether it is overestimating future profits, underestimating expenses, or not accounting for taxes, money mistakes can cost a business owner his or her livelihood.
In my practice as a business law attorney, I help my clients make good decisions every day. Let’s look at some of the financial habits successful business owners say help them remain afloat in in today’s challenging market.
Routinely Review Finances
If you have recently purchased a business or are starting your own business, you probably feel completely overwhelmed by financial decisions from time to time. The temptation to avoid thinking about money matters and instead focus on other aspects of your business may be a struggle that you know all too well. However, ignoring your finances will only worsen your chances of success. According to one study, only 69 percent of small business owners regularly review income and expenses, which means about one-third of owners are not doing so. In order to give yourself a major leg up on the competition, make sure you are reviewing your finances on a weekly and monthly basis.
Create a Budget and Stick With it
Although creating a budget for how you will manage expenses seems like an obvious necessity, less tha half of small business owners actually maintain a budget. Estimating the income you expect to receive and deciding in advance how much you will spend in expenses is crucial. At the end of each month, compare your expected income and expenses to the actual income and expenses you experienced. You can then use this information to create an even more accurate budget for the following month. The more you practice budgeting, the better you will get at it. Do not forget to include money for taxes in your budget. A general rule of thumb is to expect about 30 cents of every dollar you earn to go to taxes, however, your situation may vary depending on the unique circumstances of your business.
Establish the Right Business Structure for Your Needs
Depending on your personal and professional goals, you may want to structure your business as a sole proprietorship, partnership, or corporation. Each of these business structures has its own advantages and disadvantages. You may be surprised to learn that about 37 percent of self-employed individuals in the U.S. have incorporated businesses. The main advantage of incorporating is the limited liability business owners enjoy. However, the significance of limited liability may not matter if the corporation does not have sufficient assets to secure capital or financing without a personal guarantee from the owner.
Contact a Naperville Business Lawyer
the Gierach Law Firm offers dependable legal guidance for entrepreneurs looking to buy or start a business, as well to those who already own companies. To schedule a consultation to discuss your business law needs with an accomplished DuPage County business law attorney, call our office at 630-756-1160.